Shipping lines complain about expensive clean fuel requirements

Ocean-going vessels, burning bunker fuels with 2.75-4% sulphur content, is a major contributor of air pollutants to Hong Kong. Prevailing winds bring sulphur particles into the ‘urban canyons’ of Hong Kong, where the concentration of particles are increased, posing a huge health hazard to Hong Kong residents.

Shipping lines are now complaining that the requirements imposed by the Hong Kong government to use cleaner fuels will increase their cost of business, and demands that the government extends a subsidy scheme that incentivises the use of cleaner fuels (the scheme does not end until Sep 2015). Alarmist warnings about ‘competitiveness’ with Shenzhen are being sent out, aiming to panick and pressurize the authorities to provide more incentives for doing what is right, even though they can share the extra costs with their clients as per usual business practices.

Of note is that Hong Kong is ‘the only Asian city to impose such a requirement’. Hong Kong should not step backwards from the rare occasion of being the lead in an environmentally-friendly policy, with developing economies increasingly adopting environmental technologies and policies ahead of Hong Kong.

Ships calling at Hong Kong will face higher costs when legislation requiring vessels to switch to cleaner marine fuel upon berthing is passed next year.

Some carriers may, as a result, switch to neighbouring ports in Shenzhen.

To prevent this, shipowners said, the government should consider extending a scheme that subsidises shipping lines – many of which are expected to suffer losses this year – for the extra cost of the clean fuel.

However, a government official said, an extension is unlikely.

The city has been in talks with the Shenzhen government to create a low-emissions zone in the waters around the Pearl River Delta, but steps taken by its mainland neighbour remain based upon voluntary action by carriers.

Hong Kong is taking a tougher line and will require vessels to use extra-low-sulphur diesel upon arriving at berths at Kwai Chung Container Terminal from January 2015.

It is estimated that the switch will add between US$600,000 and US$1.5 million to a shipping line’s annual fuel bill.

As the only Asian city to impose such a requirement, Hong Kong could find its declining port business, already plagued by fierce competition from cheaper rivals, placed at an even greater disadvantage, the lines said.

“It is inevitable that the requirement would further put Hong Kong ports’ competitiveness at stake,” said Arthur Bowring, managing director of the Hong Kong Shipowners Association.

“That’s why the government should consider extending an incentive scheme that subsidise carriers for the extra fuel costs.”

The association has pushed for the law to create a level playing field, as only 12 per cent of the 32,000-odd ocean-going vessels berthing in Hong Kong have voluntarily switched to the cleaner fuel, at their own cost.

In 2011, ships accounted for 54 per cent of total sulphur dioxide emissions in Hong Kong.

Shipping lines willing to switch to cleaner marine fuel at docks have half of their port dues – which roughly make up half of the extra fuel costs – waived under a three-year incentive scheme to improve air quality that ends on September 2015.

An official from the Environmental Protection Department said the scheme is unlikely to be renewed after the law is put into place.

Christine Loh, undersecretary for the environment, said on the sidelines of a maritime seminar on Friday that Hong Kong has been in talks with Shenzhen to create a common low-emissions marine zone around the Pearl River Estuary, but she did not expect any solid outcome in the next two to three years.

However, she is not convinced the extra costs involved in the fuel switch would drive carriers away.

“The shipping lines said that would not be a determinant factor when they decide which port to call at,” Loh said.

Hu Hua, general manager of global sales at Cosco Container Lines, agreed the impact should be limited despite vigorous cost-cutting measures now adopted throughout the industry.

Hong Kong has always been much more expensive than Shenzhen, anyway, he said.

“If it’s just about cost, the Kwai Chung terminals would have been empty many years ago,” Hu said.

Shenzhen is poised to take over from Hong Kong as the world’s third-largest container port this year, with throughput at Shenzhen’s ports ahead by 930,000 twenty-foot boxes over the first nine months of this year.